(This is the final segment in our series on Social Security’s past. For a refresher on our previous installments, we invite you to take a look at posts 1, 2, 3, 4 and 5.)
Once the first amendments to the Social Security Act were in place, other changes were still needed. The first recipients of Social Security received the same monthly benefits for 10 years in the period between 1940 and 1950. Today, seniors receive annual cost-of-living adjustments (COLA) to their Social Security payments that are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). But this was not the case in the early days of the program.
The Need for an Increase in Benefits
The 1950 amendments to the program increased benefits. For some seniors, these increases were substantial. The original benefits were based on the assumption that most people would not live long after retirement age. However, life expectancy has increased significantly since the program began. As a result, many people were living longer and needed more income to cover their basic expenses.
The First COLAs
Congress increased benefits several times during the 1950s and ’60s, then made the biggest change in 1972. By that point, it was clear regular increases were needed. Due to inflation and the rising cost of living, the value of benefits decreased over time. To keep up with these changes, Congress passed a law that established automatic increases starting in 1975.
These annual cost-of-living adjustments help to ensure that the purchasing power of benefits keeps pace with inflation. The CPI-W is a measure of the prices paid by urban workers for a market basket of goods and services. It includes items like housing, food, clothing, transportation, medical care, and recreation. Every year, the Social Security Administration (SSA) looks at the CPI-W for the third quarter (July, August, and September). If there is an increase, benefits go up the following year. There is no decrease in benefits if the CPI-W goes down.
The Seniors Center: Looking at Social Security’s Past and Future
We hope you’ve enjoyed this series on the history of Social Security. There’s plenty more to learn about this important program. For more information, we invite you to follow The Seniors Center on Twitter and Facebook. And learn more about our mission to protect the future of Social Security by passing the Social Security Lock-Box Act today!
